Tertre Rouge – liquid investment in collectible cars alongside the champions!

There’s a new way out there to invest in classic cars, and it’s an interesting one as not only does it have an impressive group of automotive legends behind it, it also manages to combine liquidity with an investment class that fundamentally lacks it. The concept that I’ll explain in detail below expects to be listed on the London Stock Exchange (LSE) shortly and will hereby seek to make classic cars an investable asset class for a far larger audience than has been the case until today. This week the blog will therefore have an investment angle linked to the classic and sports cars we love!

For those of us who don’t have the financial means or interest in creating our own stable of classic cars and then trade these as they (hopefully) increase in value, so far a small number of investment funds have been the main option available to invest in the asset class. Given a fund collects money from many different investors, it can create a larger pool of cars than would have been the case for most of us, had we sought to do it directly. Another benefit of a consolidation of the assets is also that you diversify your risk and achieve cost synergies. This was notably the idea of Filippo Pignatti whom I interviewed a few years ago on this blog when we spoke about his Classic Car Fund. Unfortunately the fund had to close last year as on one hand it didn’t have enough marketing support to market it to investors, but also since one of its main drawbacks was the very limited liquidity available. 

Replicated many times, with not many originals remaining: the Shelby Cobra

All this will change with Tertre Rouge (full name Tertre Rouge Assets Plc), which is not only the name of a famous curve in Le Mans but soon also that of a listed SPAC on the LSE. SPAC stands for Special Purpose Acquisition Company and can be explained as a shell company, listed on a stock exchange, which at the time of listing doesn’t have any assets other than cash in the bank. That obviously begs the question why you would invest in it, and the answer is that a SPAC usually has a clear activity it intends to engage in. That can be to acquire a company in a specific business to fill the shell, or as the case is with Tertre Rouge, to acquire classic sports cars. Whatever the activity, as a listed company a SPAC has the same liquidity as a normal stock and can be traded on a daily basis, with the price discovery being left to the market. That’s all good and fine, but if you engage early in a SPAC, you obviously do so based on a promise that the SPAC’s manager or sponsor will deliver a certain acquisition or activity. In other words, you invest in their reputation and experience. And this is where Tertre Rouge really delivers. 

David and Mika meet again!

Mika Häkkinen (or if you prefer, the Flying Finn), David Coulthard and Allan McNish are names that don’t require any further introduction in the world of car enthusiasts. All are ex-world champions or runners’ up, all have an unparalleled network in the automotive world, and Mika and David are also car collectors in their own right. The three are founding partners of Tertre Rouge along with André Ahrlé, another car and especially motorcycle collector who will perhaps be less known to many people, but who is not only a successful entrepreneur but also has a pedigree as racing driver in the 90’s for Porsche, notably in the Porsche Carrera Cup. Last but not least, the man behind the idea of Tertre Rouge is Steven Schapera, an Australian serial entrepreneur who teamed up with André to realize the Tertre Rouge concept. And if that wasn’t enough, the company is also supported by a five-person advisory board, all leading experts in classic cars. 

What this impressive team will do is to invest in museum-grade, collectible racing and sports cars, both modern and classic, primarily Ferraris, Porsches, McLarens, Mercedes, Aston Martins and Shelby Cobras. Other brands could selectively complement these depending on the car in question, and motorcycles will do so as well, primarily from Ducati and MV Agusta. Collectible means in a condition as new, either through preservation or restoration. Factors such as the individual car’s history but also that of the brand and the model also play an important role. To be able to invest in such cars successfully in what is fundamentally a fragmented market place as so often means nothing else than buying low and selling high, and to that, the kind of network offered to Tertre Rouge by Häkkinen, Coulthard and McNish along with the advisory board and the company’s management is critical, and probably unrivalled. 

MV Augusta have built many classic bikes through the years!

The fact that Tertre Rouge expects to list on the LSE is important to the extent that a UK SPAC works differently than a US one, in that it can bring in capital in several financing rounds. The company will thus come to market to raise a specific amount to finance the acquisition of selected cars and motorcycles. Once the capital is invested, a next round will then start to finance the next acquisitions, and so on. For each round, new shares will be issued and will be available to investors. The intention of the company is to stay invested in the cars for five to seven years and then sell these, speculating in an increasing asset value targeted at 15% p.a. 

During the period of ownership, most cars will be stored in the Motorworld facility close to Cologne in Germany, only one hour from the Nürburgring, where both investors and the public can admire them. Motorworld is the home of various car exhibitions but notably also of the permanent exhibition of Michael Schumacher’s private car collection with go-karts from his early days, sports cars, trophies, unique memorabilia, and most of the Formula 1 cars he raced in his fantastic career (and keep on fighting, Michael!). It’s also a space that allows for events for up to a few thousand people which can come in handy since Tertre Rouge is close to various clubs and associations in the supercar world, and aims to use the space also for promotional activities on a regular basis. 

Motorworld is indeed a very suitable storage place!

Tertre Rouge is indeed something completely new in the classic car investment world and something I believe, based on one hand on the liquidity but on the other and even more importantly, on the unique team the founders have been able to assemble, has a great potential. For full disclosure I was given the opportunity to participate in the oversubscribed, initial financing round of the company and was happy to do so (on equal terms to all other investors). That’s also why I’m able to tell you about this before the official listing, and for the same reason I’d also ask you to keep it at least somewhat confidential until the actual listing occurs, which is expected to happen in the coming weeks.

Tertre Rouge will however come to the market soon again to finance the first round of selected cars so if this sounds like an interesting proposition, don’t hesitate to contact me or write directly to info@tertrerougeassets.com, quoting the blog as reference!

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